Climate Change Infrastructure Spending: Key to Prosperity?

Eliminating fossil fuel subsidies and pricing carbon will create the financing necessary to build the new infrastructure necessary to reduce destructive climate change. Proceeds from the infrastructure can pay the looming future retirement outlays for an aging global population.

Reforms like this will create a multi-decade global economic boom. That, in turn, will generate the cash flows needed to fund an aging global population. It’s a virtuous circle.

Successfully solving the world’s two biggest current challenges — climate change and global aging — will determine what life is like in the second half of the 21st Century.

There’s no time to lose.

Some estimates peg the global retirement funding shortfall as already equal to the world’s current $80 trillion collective economy.

Meanwhile, the world is at a tipping point where storms, starvation and drought are going to hit harder and harder.

Infrastructure is now one of the most attractive places for long term investment.. Carbon markets, meanwhile, offer huge potential to generate the needed price signals to create the fortunes of tomorrow.

Together, carbon pricing and infrastructure investment can generate the cash flows needed to raise economic growth. Think of it as the Marshall Plan after World War II — but on steroids.

These initiatives are being pushed in different but largely supplementary ways by multilateral organization such as the Energy Charter Treaty,ASEAN+, the Asia-Pacific Economic Cooperation (APEC) Group and others.

For instance, the Energy Charter Treaty is working to develop common protocols for investment. Meanwhile, ASEAN+ and APEC are working to develop multilateral strategies for needed investment in generation and transmission infrastructure.

For their part, organizations like the Asian Infrastructure Investment Bank, the World Bank and the Asian Development Bank similarly are working on new financing models to pay for all this.

And on the unilateral level Japan, China, the US and the European Union are each developing the markets to properly price carbon and recycle the proceeds into investment.

Among the most promising current initiatives are efforts by the Group of 20 largest economies to eliminate distortionary fossil fuel subsidies by 2025.

Meanwhile, former US Treasury Secretary Larry Summers is among those who believe large-scale fiscal spending on infrastructure, particularly on energy and climate change, can boost global economic growth and lay firmer foundations for 21st Century global prosperity.

Key to his argument is that new investment in infrastructure can generate the long-term returns needed to pay looming retirement obligations.

The alternative, he notes, is for either a default on these obligations or a renegotiation downward of previously promised payments – which could be politically destabilizing.